Court rules short term capital gains not eligible for Section 54EC exemption

The Court dismissed the appeal filed by the revenue for the assessment year 2006-07 regarding the exemption under Section 54EC for short term capital gain on depreciable assets. The Court held that the exemption under Section 54EC is available only for long term capital gains and not for short term capital gains. Additionally, the Court found that Section 50, which deals with the computation of capital gains for depreciable assets, treats such gains as short term capital gains, thus excluding the availability of exemption under Section 54EC. The appeal was dismissed without costs based on the Court's interpretation of the relevant provisions.

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Issues involved: Appeal filed by revenue for assessment year 2006-07 regarding exemption u/s.54EC from short term capital gain on depreciable assets and interpretation of Section 50 for computation of capital gains.

Issue (a): The main issue is whether the ITAT was justified in allowing exemption u/s.54EC from short term capital gain on depreciable assets, even though Section 54EC provides exemption only for long term capital gain. The appellant argued that the exemption under Section 54EC is available only for long term capital gains, not short term capital gains.

Issue (b): Another issue is whether the ITAT was correct in not considering Section 50, which deals with the computation of capital gains for depreciable assets. Section 50 states that capital gains from the transfer of depreciable assets shall be treated as short term capital gains, thereby excluding the availability of exemption u/s.54EC, which is specifically for long term capital gains.

The Tribunal relied on a previous decision of the Court in the case of CIT V/s. M/s. ACE Builders Pvt. Ltd. to address the issues raised in the appeal. The Court found no reason to entertain the questions of law proposed by the appellant and dismissed the appeal without any costs.

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